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Why is the crypto market down today?

Cointime Official

From cointelegraph by Nancy Lubale

The cryptocurrency market took a hit today, with the total market capitalization dropping by around 3% to about $3.54 trillion on Jan. 23. Most top-cap cryptocurrencies are flashing red, with Bitcoin 

BTC$101,563and EtherETH$3,209.19each down 2.6% over the last 24 hours.

  24-hour performance of large-cap cryptocurrencies. Source: Coin360

Let’s look at the factors driving the crypto market down today.

Delay over crypto-related executive orders

The crypto community was optimistic that President Trump’s return to the White House would bring with it a suite of economic policies that would positively affect the cryptocurrency market

Trump had promised to make the United States the "crypto capital of the world” and was expected to make a flurry of executive orders on his first day in office to address this, including potentially establishing a Strategic Bitcoin Reserve.

As of the time of publication, President Trump has not yet issued any specific executive orders directly related to cryptocurrency policies.

There are indications that he plans to introduce several crypto-friendly measures, including creating a crypto advisory council and reversing SEC Accounting Guidance (SAB 121).

The new Crypto Taskforce for developing a framework for digital assets by the Securities and Exchange Commission on Jan. 21 is viewed as a step by Trump toward delivering on his campaign promises.

Source: SEC

Nevertheless, his proposed policy to eliminate capital gains on US-born cryptocurrencies has raised concerns, with some arguing that it could potentially favor a select group of assets, leading to market consolidation around a few assets and leaving others vulnerable to devaluation. 

Macroeconomic indicators

Beyond crypto policies, today’s crypto market slump is also a reaction to broader macroeconomic indicators. The US services sector growth, recently reported to be faster than expected, has increased Treasury yields as investors flocked to safer assets. 

The US dollar is also strengthening, with the DXY index trading in its third consecutive daily session, rising by 0.61% from a low of 107.75 on Jan. 22 to an intraday of 108.40 at the time of writing. 

This could be attributed to the array of tariffs that Trump said his administration will “introduce on China, Mexico and Canada,” according to The Kobeissi Letter.

“President Trump said that 25% tariffs on Canada and Mexico and 10% tariffs on China are likely by Feb 1st.”

  Source: The Kobeissi Letter

As a result, US dollar is rising, “pricing-in tariffs” and “America first policy” fronted by the Trump administration, the comments added.

Coupled with this, the Federal Reserve’s decision to signal only two interest rate cuts in 2025, instead of the three as previously anticipated, has introduced a more hawkish outlook

Futures markets have completely priced in the possibility of interest rates remaining the same at the US Federal Reserve’s Jan. 29 meeting, with a 99.5% chance, according to the CME FedWatch tool.

  Fed target rate probabilities for Jan. 29 FOMC meeting. Source: CME Group

The earliest possible rate cut is expected in June; the odds are currently at 44.8%. 

This shift in monetary policy suggests a continued fight against inflation, or likely higher borrowing costs and a less favorable environment for riskier investments like cryptocurrencies.

Related: House Democrats want ethics probe on Trump over crypto projects

TOTAL 50 SMA becomes resistance

Today’s drawdown in crypto prices has seen TOTAL—the combined market capitalization of all cryptocurrencies—lose key support at the 50 simple moving average (SMA) at $3.5 in the four-hour timeframe. 

This level is now an immediate resistance on the upside, adding headwinds to the sell-off. 

Additionally, the relative strength index (RSI) has dropped from overbought conditions at 75 on Jan. 17 to 44.

If the selling intensifies, the crypto market will likely drop toward $3.43 trillion, the ascending trendline support in place since Jan. 19.

  TOTAL/USD daily chart. Source: Cointelegraph/TradingView

On the other hand, a resurgence in buying pressure could push the crypto market cap back above the 50-day SMA and toward the next resistance above, i.e., the local high of $3.61 trillion reached on Jan. 21.

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